As the situation in China unfolds, our team of economists and strategists will closely follow the implications for markets and economies around the world. Find all the latest commentary from UBS here, updated regularly as the situation plays out. To request a specific report, please contact Huw Williams.
China's economy has many evolving issues that affect global markets and concern investors. How should one understand these complex issues? The 4th instalment of our "Understanding China" series focuses on China's unending property bubble debate and the implications of a property downturn.
- Two monetary policy moves in time for the Lunar New Year
With days to go before Chinese New Year (CNY), China's central bank made two moves this past week that have caught the market's attention.
- First was the PBC's unveiling of a new liquidity provisioning tool on 20
January, its first in over two years. The temporary liquidity facility (TLF) was intended "to provide for the typical pre-CNY spike in cash demand and to ensure adequate liquidity in the banking system and stable money market conditions". The TLF offers a temporary supply of base money mainly for the 5 large state owned commercial banks, a tenor of 28 days, with an interest rate similar to that of open market operation (OMO) tools with the same duration (i.e. the 28-day repo).
- Second was the PBC's increase of its 6-month and 1-year MLF rates today
(24 January), by 10bps to 2.95% and 3.1%, respectively, in its provision of RMB 138.5 billion in 6-month MLF and RMB 107 billion in 1 year MLF. The PBC's stated objective was again "to maintain stable liquidity in the banking system", and also to replenish the decline in liquidity caused by recently expired MLF to 22 financial institutions
China's Monetary Policy Maze
China's economy has many evolving issues that affect global markets and concern investors. How should one understand these complex issues? The 3rd instalment of our "Understanding China" series focuses on its monetary policy framework, liquidity management, and the increasingly difficult task of achieving objectives amid capital outflow pressures, increasing debt and the rise of shadow banking.
We continue to expect a slowdown in property activity to drag GDP growth down to about 6.4% in 2017, even though Q1 property investment may remain relatively robust. Macro policies will likely strive to strike a fine balance between supporting growth and control financial risk, with credit growth slowing only modestly while money market rates likely stay elevated, at least early 2017 when inflation move higher.
How serious is China's debt problem?
China's economy has many evolving issues that affect global markets and concern investors. How should one understand these complex issues? The second instalment of our "Understanding China" series addresses questions on China's debt.
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